Second straight quarter. It flames Week International demand and investment in ecommerce. Shery this hour brings another snapshot of the japanese economy. Trade data may show the deficit balloon in november. First, lets get you to the market action. Australia has come online. Sophie aussie shares opening, a little change to the upside with the benchmark twopoint shot of a fresh record. The aussie dollar Holding Losses after the rba reinforced the inw for its rba rate cut february. Pricing at a 59 chance. Thailand rates decision. Expect it to stay steady as it is stabilizing. We also waiting on japans november trade data later this morning. Nikkei futures pointing lower ahead of that. Overall, looking like a soft start of the session after asian shares closed at a high, with fresh eyes across the region including india. Right. L ll lets check in with the first word news with jessica summers. Jessica sterling slumped the most since january as fx traders gave a thumbs down to Boris Johnsons plan to enshrine next decembers brexit that led into law. The renewed prospect of a hard split lost all of the gains since last weeks conservative election win. Money markets waited with the probability of a bank of england rate cut before may, falling back to 50 as before the election. Anger continues across india as the government defends a controversial law. It bars undocumented muslims from seeking citizenship while allowing migrants from other religions to do so. A minister help to move the bill through parliament and told Business Leaders there is no chance it will be repealed. Police clashed with students in new delhi and protest also flared in mumbai. Is thee former dictator First Military leader of pakistan to face the Death Penalty. This is after a sixyear treason case. The verdict is seen as a blow to the powerful armed forces and drew strong criticism from senior officers. Musharraf has lived in dubai since 2018 and never attended court. It is the first time in pakistans 72 year history that a military ruler has been tried for treason. And, china is boosting its military might at the commissioning of a second aircraft carrier. Theame into service in presence of president xi jinping. Its china first entirely home built and designed carrier. Its other one was commissioned in 2012 after being remodeled from a former soviet naval ship by ukraine. Global news 24 hours a day on ke, powered byckta more than 2700 journalists and analysts. Im jessica summers. This is bloomberg. Paul thanks. Staying on china, more details emerging on how beijing would increase imports from the u. S. By as much as 200 billion as part of its commitments on the phase one trade deal announced last week. Fromackenzie joins us now shanghai with the details. Planningow is china to meet a pretty ambitious target . Tom it is very ambitious, these targets. The u. S. Has said that china is committed to buying 200 billion of goods and services, on top of the 180 billion annually they were buying before. That is going to be purchases of between 40 billion and 50 billion of ag goods from the u. S. , farm goods over a twoyear period. What we heard from china and our sources is one way they are looking to do this is to remove tariffs on u. S. Ethanol. It used to be a trade where they would buy 200 million gallons of u. S. Ethanol in 2016. It will go some small way to adding up these numbers. The other thing they are looking at doing is potentially rerouting some trade from hong kong to the mainland, worth about 10 billion. Again, we have heard they are pretty cautious about the impact that might have on hong kongs economy which is already in recession. The other part of this they are looking at doing is that will keep tariffs in place of things like soybeans and pork, but they are going to issue where waivers on those tariffs more regularly. That will allow state and private companies to purchase u. S. Soybeans, pork and other farm goods were easily to help get to those numbers. Theres a lot of skepticism on whether or not china can really live up to this commitment that the u. S. Says it has made. Shery on a different front of the u. S. China relationship, we continue to have tensions over huawei that was blacklisted back in may. Washington could be tightening this ruse on the company even more . What are we hearing . Tom we are hearing the Tech Industry in the u. S. Is very concerned. Software makers, chipmakers in the u. S. , they are concerned that the Commerce Department led by wilbur ross is looking at changing and trying to close a loophole that some u. S. Companies have used to continue to sell their products and services to huawei, despite the blacklisting back in may. The uss huawei is a major security risk. Something the Chinese Company denies. The blacklisting was put in place in may. The company has been using a loophole which allows them, if they can prove their products, 75 of the work is done outside the u. S. , then they can continue to sell the products to huawei. With the Commerce Department is looking to doing is changing that rule to 90 . They now have to to prove that 90 of work done on the product is done in the u. S. The Semiconductor Industry and Software Industry is arguing if that happens and they are forced to stop complete, all of their sales, you will get the south koreans, taiwanese and other competitors filling the gap. They are very concerned about what it will mean for their businesses and the lobbying has started in earnest already. Shery Tom Mackenzie in shanghai. Thank you. A fedehead, fedex facing xodus as investors ditch the stock on the falling forecast. We will have the details. Paul next, qic managing director Susan Berkley tells us where she is looking to capture yield into the new year. This is bloomberg. Paul this is daybreak asia. I am paul allen in sydney. Shery i am shery ahn. Another leading fed official is jumping on next yearss no policy change bandwagon as he prepares to regain on the fomc. Kathleen hays has been speaking exclusively to dallas fed president Robert Kaplan. What exactly did he say . Kathleen lets put Robert Kaplan into perspective. He was on board with the rate cuts and then he was a little uncertain about the second one. By the third one, he was not sure he was on board at all. And he was worried about the yield curve. Line, he does see the economy staying on track. Are you in this camp of no changes next year unless something happens . I said what you mean . Heres what he said. Material change in the outlook, either for better or for worse. I have already gotten baked into my outlook. We will have weak manufacturing next year, sluggish global growth. Pretty sluggish Business Investment. There would have to be some Material Change for that outlook. Kathleen where is the risk in your mind . Robert it is fairly balanced at the moment. I am hoping we will get some stabilization in trade. I think of moves the fed has made has been helpful. The risk are balanced. Kathleen if you see the risks tilting towards the upside and the possible need for a rate hike, would that be hard to do in an Election Year . Would you consider that ill advised . Something the fed will try to avoid . Kathleen it will not be a factor in my thinking robert it will not be a factor in my thinking as usual. Divorce political influences. I think we will try to make the best decision we can in light of the circumstances. Kathleen you repeated this morning as you have said, you expect 2 growth next year. That has not changed. It sounds to me like you dont really expect the passage of the phase one trade deal to have much impact on the economy, certainly not out of the gate. Robert that is probably correct. I have been hoping there would be some trade stabilization generally. This is part of that. That is not to say you have heard me say this before i think the trade issues with china will go on for years, not months, but years. I think most businesses are adjusted to that. These issues of intellectual property, technology transfer, and the much deeper issues with china are going to be going on for a long time. Phase one is better than not having phase one, but it does not mean there will still not be trade uncertainties read kathleen another thing you have pounded the table on for the last year and a half this has been going on its not necessarily impact of the trade war of the economy, per se, although we have seen the hit on manufacturing. You say it is more about the hit on businesses. Business uncertainty and what that means for investment. Conclude you think the uncertainty is not going away with a trade deal that will go on and on. Phase two negotiations that are starting immediately, according to the president. Robert if it was just about the trade dispute with china, i think businesses could manage that. I think helping get usmca ratified also helps. I think for most businesses i talk to, it is the broader trade uncertainty. Two months ago or so, we threatened to mexico with tariffs, even though we had a trade agreement. That would have had a substantial effect on logistics, supply chain arrangements. It wound up not happening but the threat was enough to cause businesses to realize even with trade agreements, if we have a National Strategy that uses tariffs as a Foreign Policy an economic tool, you have to be prepared as a business. You will have more uncertainty. Most businesses i talk to are not canceling projects, but they are saying lets put them on hold and lets slow down. We are seeing that in Business Investment. Kathleen rob kaplan acknowledges that maybe this part of the trade deal negotiation is not going to help the economy that much. He talks about the concern about manufacturing. What is keeping the economy going . Consumers. Like all fed officials, he is saying the consumers seem to be doing pretty well. This is what he is counting on. With low unemployment. The key to the economy moving ahead. I asked him what happens if that starts to give out . We saw a weak november report. Not worried yet. Shery what does he think about inflation . Perhapsn analyst saying inflation risk have been underpriced . Where does rob kaplan stand on prices . Kathleen i would say rob Kaplan Thanks obviously, it is below target. Over time, you will get a move towards higher inflation. This put this into interesting perspective, because coming out of the meeting, we saw the big long line. 13 people. Rob kaplan is one of those 13 say i dont expect rates to be higher or lower at the end of next year than they are now. There are four people looking at the possibility of one rate hike and that is have to include of the economy hangs in there, we are going to gradually seek inflation moving higher. I asked him about that. Are you in the same camp as jay powell who said at the press conference, wlel, in order to be looking at a rate hike, i need to see inflation consistently higher. Inflation starts rising, what is persistently higher . Do you worry at 2. 1 , 2. 2 . At what point do you say we have been at 2. 1 long enough, have to start raising rates . Rob kaplan is in the camp where higher inflation will be welcome and does not expect forces together to push it up weekly anytime soon. Paul all right, kathleen hays. Thank you for joining us. We are going to have more from that exclusive interview with Robert Kaplan ahead. This is bloomberg. Shery fedex tumbling and extended trade as it missed on earnings and revenue, and cut its forecast. Su keenan has more on this story. What exactly led to this plunge . Su it is the Second Straight Quarter it has cut its forecast. You can look back to the trade difficulties earlier in the year. They were caught in the middle of the trade war. Amazon has sort of severed its business ties, directly at least. Take a look at how it is moving after hours. It has been down almost 7 as it cuts the outlook and misses the outlook. Forlso announced profits the Second Quarter were down 40 , revenue has fallen 3 . It is a real when in terms of bad news. Chart, see the fullyear it had a decline. It was a pretty choppy ride as it found itself in the middle of trade war difficulties, which we will get to. From june on, amazon had started ending its direct business and then it heightened tensions in the past couple of weeks by asking third parties, actually banning third parties using fedex. We looked at the headlines after hours. Again, fedex was already really. Reeling. In the report we are looking at a fedex chart. Fedex is trading at a discount to ups and it shows how that is trailing its rivals as well. If we have some video we can roll of the packaging operation at fedex, you really get to the heart of what the issue is. They have not been able to manage their shipping costs as well as ups has in terms of dealing with the onslaught of online retailing. They have also lost of a lot of International Business which they cite as being weak. They noted the loss of a Large Business customer hurting the revenue. That of course would be a reference to amazon. Point out fedex shares have only managed to recover from the trade war trouble that struck earlier this year. Now there seems to be more challenges ahead. All the while, it is the lagging its rival ups. Su if we look at ups has done year to date in terms of Stock Performance versus fedex, it is fairly dramatic. Thats potentially likely to widen Going Forward. Some of the headlines coming out afterwards, fedex had done its best to try to manage its shipping costs. Putting a lot of investment into more streamlined operations, but have yet to pay off. In the meantime, they are citing weaker international demand. They did get caught in a controversy with chinese authorities, having issue with fedex. Just as their stock rebounded, we mentioned, they are now facing not only the amazon backlash but this decline in the stock after hours which will play into trading on wednesday. Paul su keenan, thank you. A quick check of the latest business flash headlines. Southwest airlines now expects to go more than a year without its boeing 737 max fleet as it pulls more services. 300 daily flights are being cut through april, five weeks longer than originally planned. It represents almost 8 of southwests regular daily operations. American airlines has also pulled the max through early april. It helps the plane will return in march. Partner is sete to offload part of its 12 stake as part of the french carmakers plant merger with fiat chrysler. Is not a state owned company by french and may lead to the breakup of dongfen S Partnership in china. Psa Board Members have formerly approved the buyout. Paul south americas biggest truck makers and suppliers are firing hundreds of workers. It will reduce global employment by more than 10 as it slashes the 2020 forecast to below the smallest projection. It sent shares tumbling more than 10 , the biggest fall since october of last year. Shery we work obtained new financing in a fundraising drive led by goldman sachs. It would free up roughly 800 million in cash for the struggling Office Sharing startup. Our finance reporter joins us in new york. How significant is this . For softbank, this is the first major hurdle crossed in trying to salvage their big investment in wework. Now, they can sort of make sure the company has some amount of money to try to get its act together which is a few months removed from earlier in the summer when wework was an ambitious, big tech of any breednow at the end of the year, we are talking about making sure the company can survive, stabilized and move forward from that point on. The big thing in this deal is the way they structured the financing for themselves, it frees up a mountain of cash for the company and that is critical Going Forward. Agree to did goldman provide this financing and does it come with any expectations attached . Sridhar goldman has gone ahead and guaranteed financing for wework. That would only happen if the bank is comfortable knowing it will be able to syndicate the loss. When we purported this, we talked about the twist they brought into this deal. They went ahead and made softbank, which sort of is the ultimate owner of wework, one of the guarantors of the credit line. That nature other lenders would be more comfortable with taking this credit risk. That is the indication that goldman must have gone. That is why it went inside and found this facility with the fund today. Paul so, what is the next stage for wework in terms of the revival process . Sridhar again, this is all part of softbanks giant bailout package. Billioniled this 9. 5 package after the ipo was abandoned to make sure they dont have to lose any money. They are throwing good money after bad. A 5 billion financing. Ack stock soto buy b the company. It is accelerating a number of its payments. One part of the financing has been done. They still have to come back in january or early 2020 to obtain other financing. One step at a time. They are taking baby steps. This is not the grant tech play from earlier in the year, but a viable Real Estate Company option that some investors would find interesting. Shery what happens to their business now because we have seen them starting to sell their assets . Sridhar they have obviously got out and sold noncore assets. We dont want to focus on everything that was the brainchild of the imagination. Go big, go grand. Lets forget about it. Lets focus on the core business which is bring in some rent and make sure we are paying less to host people in those facilities. That real estate arbitrage is what this was all about. They have a lot of cash that allows them to go ahead with the leases they are committed to carry out. Make sure they are continuing to serve their clients and in a year hope investors start getting attracted to the wework story all over again. Shery thank you, our finance reporter with the latest. Lets turn now back to hong kong for another check of the markets. Sophie checking in on some movers in sydney. Rising as much as 3 and now moving to the downside peter after it agree to an 800 million deal to buy a 50 stake in a mine in western australia. A share response to billy for operating that mine. Gaining 1. 6 this morning. Had a contingent in the Alaska Project and expects thirdparty deals in early 2020. Oil search looking to get between percent of its stake. Qbe insurance lighting on its guidance for its north american business. The company says it is on track to report a net investor return towards the upper end of the 2019 target, but lower than the 2020 target. Paul thank you very much for that. We do have plenty more to come on daybreak asia. Stay with us. This is bloomberg. Jessica i am jessica summers with the first word headlines. The u. S. Government is heading off calls from china and russia to ease sanctions on north korea despite claims pyongyang has complied with u. N. Resolutions. A proposal met pushback from washington, with President Trump says he will take care of any threat kim jongun has in the works. Beijing and moscow says north korea is in a critical situation and needs help. Thezealand is to replace governing rbnz with two new places of legislation of deposit makers from the banks other roles. It is part of an extended review nz that includes a broader policy mandate. The current laws are 30 years old and the government says they must be brought up to date. Signs thatare more hong kongs economy is suffering under the impact of prolonged protests. Unemployment past 3 last month to the highest level since 2017, with an eight year high of more than 6 in the food and beverage sector. Local Airlines Face job cuts and even bankruptcy as tourists stay away. Cathay pacific reported a fourth straight monthly drop in passenger traffic. Nsa whistleblower Edward Snowden will not profit from his recent memoir because he failed to win free publication from u. S. Security agencies. The book was released in september and reveals how he helped build the top sick topsecret Surveillance System he later exposed. The government sued to prevent him from profiting but did not try to block the publication. Global news 24 hours a day on air and on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. I am jessica summers. This is bloomberg. Shery the house of representatives has officially scheduled to vote wednesday on two articles of impeachment against President Trump. Adoption of the measures would make him the third president in u. S. History to be impeached and would have a trial in january. An edited is watching this dcp to is this as far as we go because we hear from said it would or delete are Mitch Mcconnell saying there is zero chance of conviction . Anna barring any additional revelations the next few months, it looks like the senate will acquit trump of these charges paid we expect the house vote tomorrow to be a long largely party lines with most democrats voting to impeach trump and most republicans voting against that resolution. When it gets to the senate, it should be similarly partisan exercise with a bit of a longer trial. We are looking at two to three weeks at least in the senate. Shery President Trump has expressed interest in a fullblown process, calling witnesses and so on. What are we expecting the process to look like in the senate . Anna Senate Majority leader Mitch Mcconnell has described it as two phases. The first phase would be hearing the testimony that has been presented in the house, which will be presented by House Democrats who will be chosen as impeachment managers. There could be a second phase when additional witnesses could be called. There has been some disagreement between Democratic Leaders and Republican Leaders on what that should look like. Minority leader Chuck Schumer said they should call Trump Administration officials like john bolton and Mick Mulvaney to testify in the senate. The white house is resisting that, saying there should be other witnesses, like former Vice President joe biden. Considering the result of this, the standard seems to be a foregone conclusion. Does this whole issue resonate at all with voters into the 2020 election or is it very much an inside the beltway kind of issue . Anna voters are pretty split on whether or not they support the impeachment of donald trump. It is unclear if there are many voters left that will really change their mind. It seems like the party is polarized where it is going to be. Democrats are going to support impeachment, republicans are going to be opposed. There are not many voters in the middle that it still persuadable. This is still an exercise that is extremely important. Something democrats have cast as part of the constitutional duty given what they describe as the gravity of trumps actions. Paul President Trump looks to be safe, as we have discussed, but it does not stop them from releasing a rather scathing defense of himself. He said a few prize words for speaker nancy pelosi. Anna we saw quite a letter from the president today written to nancy pelosi. It looks like a few of the president s tweets, but in letter form. There were exclamation marks, capital letters. He compared it to the salem witch trials. He said he does not believe nancy pelosi when she said this was a solemn exercise and praise for the president. He says she has taken this word impeachment and cheapened it even further. You see how there is a total breakdown between institutions now. I will say we have seen some bipartisan action in the house of representatives this week. Yesterday today, passing a massive 1. 4 trillion spending package. On thursday, excited to vote on the north american trade deal, usmca. Paul congress editor, anna edgerton, thank you for keeping an eye on those stories. Fed officials stressing rates on hold barring a big outlook shift. In an exclusive interview, Robert Kaplan brushed off concerns about the health of the u. S. Consumer and manufacturing sectors. Back the clock to june, weak manufacturing in the u. S. , weaker than it has been in 2009. I said at the time we should do modest, limited restrained adjustment the fed funds rates to address those issues. But the other day was the curve was inverted and i felt it would be better if we had an upwardly sloping curve. To me, the curve is a symptom that maybe our adjustments were about right. It wasnt intended to solve these issues, but it was intended to adjust policy in light of these issues. I think the curve being upwardly sloping tells me we are in probably the right place. Kathleen that is a strong signal if it were to move in the other direction robert it would concern me. Kathleen the consumer, the fed is putting so much impact of the consumer. Retail sales have been decelerating. The november number was half of what the forecast was. Our Economics Team is expecting sales to come in at a gain of 3. 4 over last year. The second weakest of the cycle. What is your main engine of roof starting to run out of gas . Robert i dont think that is going to happen and here is what i will be watching for. I have been worried that weak Business Investment and weak venue factory would seep into other parts of the economy. We have not seen that yet. Even at any given month or quarter, Consumer Spending is weaker than it might have been, there is no doubt consumer Balance Sheets are not perfect but in mesh better shape and we have a tight job market. There is no evidence that the jobs market is doing anything but getting tighter. That is a good tailwind for the market. Unless something changes that causes unemployment picture to change, the consumer is going to be solid for next year. That does not mean in any month or quarter, they are going to spend but they have the capacity to spend. That is a pretty good underpinning for the economy. Kathleen the other side of the policy coin is inflation. At the press conference after the meeting last week, jay powell said he would have to see persistently rising inflation to get on board with a rate hike. What is your position . Robert we have been in a situation where we have been able to run a very tight labor force without inflation taking off. We have had muted inflation. What isly would have great about the fomc, we have a different take on this. I will be looking at what potential growth does. I will be looking at what the trends are in the labor market. Yes, in addition, i will be looking at where we are versus our target. I will be looking at a range of factors. I will be looking at Financial Stability issues and weighing some action is appropriate paid i will be looking at that. Shery that was Robert Kaplan. We have breaking news. We are now hearing that pg e, the utility in california, has reached an agreement with regulars for a 1. 7 billion settlement over those fire incidents in california related to their equipment. Pg e and regulators reaching that 1. 7 billion settlement over those fires. Recoveringment also the money from customers. Coming up, we will focus on another central bank next. We will look ahead to the bojs policy decision on thursday as we await the latest trade data from japan. This is bloomberg. Shery this is daybreak asia. Im shery ahn in new york. Paul i am paul allen in sydney. Lets get a quick check of the latest business flash headlines. American express rosen u. S. Trade as Singapore Sovereign Wealth Fund announced investors buying a stake in the Global Business travel division. Qatar Investment Authority and funds managed by blackrock are buying in. 50 ownership with the deal valued at 5 billion. After slumped in new york slashing its outlook and warning the november sales were considerably lower than expected. It now expects full year revenues to be done as much as 18 compared to initial forecast of singledigit growth. Results on full january 14. The stock lost half of its value this year. Paul may be set to move further away from topography to the more lucrative health care sector. Unitiagnostics imaging says it is worth 1. 6 billion. Health care and diagnostics is the highest revenue generator among fujifilms business and accounting for more than 40 of its overall income. Shery a recap on the pg e headlines. We have seen the bankrupt utility in california reaching an agreement with regulators for 1. 7 billion settlement over those fires in california. Theaw pg e jumping in afterhours session, gaining about 3 at one point over that settlement. Thesettlement barring recovery of money from customers as well. This is a very drawnout bankruptcy process. They declared bankruptcy because of 30 billion of liability tied to wildfires with its power lines. They were blamed for causing those fires. You can see pg e after hours gaining ground, jumping about 3 after reaching the 1. 7 billion settlement with regulators. Lets turn to japan. The boj will likely hold meetings tomorrow amid the signs of a slowing global trade tensions and a huge government stimulus package. We will have the latest trade numbers in a moment as well. First, lets head to tokyo and welcome bank of America Merrill lynch head of economics. Great to have you with us. What are we expecting in terms of boj policy given we have seen 120 billion plus of stimulus measures coming from the abe government . Not as, so we are excited as the fiscal stimulus package. We think the headline is pretty inflated. It does permit a fiscal cliff and it does help the bank of japan. With trade still turning the corner, it is not strong yet, i think they are going to be pretty comfortable holding. Shery especially now that we are giving seeing 10 year yields jumping. This chart showing at one point, we saw them actually turned green and rising above zero. Now comfortably within that target range. How much market pressure is japan or the boj getting in order to move . Izumi considerably less. What you are referring to is market operations. They were in a pretty tough spot back in august when they were basically losing control, yield curve control. Now, we are back to the midpoint of the target which is a good place for the bank of japan to be. I think they would like the curve to steepen more but they are not in a rush at this moment. Paul you are suggesting it is time for Strategic Review for the bank of japan. What needs to be addressed . Izumi theres a lot of things that can be addressed. Gave pretty specific advice for the bank of japan. We dont think all of them are realistic for the bank of japan to follow in the near term but one thing they should address in the near term, perhaps in 2020 is the issue of their communication. Theres a lot of confusion as to what the bank of japan is targeting. The still have quantitative targets intermixed with the Interest Rates targets. They will have a challenge in 2020 because of they do continue reducing bond purchases, they may have to reconsider what they will do about the 2 Monetary Base overshooting commitment, which has promised to keep on expanding the Balance Sheet until the target is met. There is a lot of issues it is worth thinking about and tackling more from the front. Paul what about this 2 inflation target . Is that worth thinking about as well . Im sure if the bank of japan quietly walked away, the market would understand. Izumi i dont think there is particular expectation from the government nor markets from the bank of japan to do anymore to try to achieve 2 inflation in a short amount of time. It will take a very long time to get there. At the same time, i dont think they are comfortable giving up and abandoning or changing the target at this moment. There was one suggestion by the imf to target a wider range of 1 to 3 . That makes a lot of sense. That is something that is not going to be considered in the near term. Shery in the meantime, we continue to see this rally in japanese stocks. Is this going to continue into 2020 . Izumi well, we think in the nearterm, it is possible that actually the japanese equity markets continue to do well. Theres a lot of tailwind cyclically from expectation of export recovery. Yen is also very weak. Our strategists are questioning whether it is sustainable past middle of 2020. For now, it looks like a pretty good place for Japanese Equities and investors are in good position. Shery how much does it help the fact japan did manage to strike a mini trade deal with the u. S. . Izumi i think it is very meaningful in the scope it gets the u. S. Off the backs. One of the biggest fears among Japanese Corporate was this idea of the u. S. Imposing auto tariffs. That has quietly faded into the background. I think japan will be a target of that. It is quite helpful we have this deal done. The u. S. Is looking at a phase two deal as it is with other trading partners, but it is probably not something that will be tackled until after the president ial election. Paul in terms of sorting out issues on the trade front, how great is the importance of working something out with south korea . Izumi it is important. Doesnot just japan a lot of good trade with south korea but it is actually one of the biggest sources into japan. A quarter of visitors of japan are south korean. We have seen a hit to the services. It is important that the two sides first avoid the situation from deteriorating further, which has been the case over the past few weeks. They are now talking so that is a positive step. But it may take longer for a more comprehensive, you know, improvement and relation. Shery we are getting japans export numbers for the month of november. A contraction of 7. 9 . His mother contraction than expected. The contraction is easing from the previous month as it plunged ninth. 2 . When it comes to imports in november, down 15. 7 which is a bigger drop than one expected. Also bigger than the previous month. This brings the adjusted trade balance at a deficit of ¥60. 8 billion, a bigger deficit than expected. Also much higher than the previous month of october. Unadjusted for those seasonal factors and deficit coming in at ¥82. 1 billion. Pressure on exports. This will be the 14th consecutive month of exports in the red. Imports also falling for the seventh consecutive month, although we do have to point out that we are seeing we were expecting a smaller decline in imports given the slump we saw in october. Possible typhoon, not to mention the sales tax hike heard a consumer depending spending. Imports are also down 15. 7 . Much greater than expectations and much larger than the previous month of october. Lets turn back to our guest. You digest these numbers. Exports better than expected, but imports plunging more than thought, down more than 15 . What do you make and what is your assessment of what is happening in japan . Izumi yeah, quite frankly, i would be more worried about the import number. It is because of that weakness in domestic demand, particularly consumption that we saw after the tax hike that is weighing on imports in domestic demand in general. I think it fits with our view that in the Fourth Quarter of this year, we are going to get some pretty bad gdp numbers because of this decline in private demand. In terms of exports, im encouraged to see the momentum seems to be stabilizing and improving so that is good news. It is also not a particularly strong pickup. We are seeing improvement in i. T. Related sectors but autos and steel is weighing on the overall number. It is a mixed bag but my concern going into 2020 would be the speed and timing of the recovery in private demand and consumption. Paul we have seen a little bit of easing in the yen recently. Youhe risk off trade can expect that to prop up exports going into the next quarter . We found not that since the 2000, the yen does not matter too much for export volume and investment. Unless the move is really big like we saw. It does help with corporate profits. I think a stable yen is very helpful in shoring up corporate sentiment. It does help at the margins. Shery we are also seeing exports to china for the month of november falling more than 5 . 5. 4 year on year. We continue to see improving numbers out of china in their ecodata. When can we expect that to translate into japanese growth . Izumi yeah, so, our china team expects the bottom in chinese growth to be around the First Quarter of next year. That does mean the export recovery may be around there or slightly later. We have seen an improvement in equipment demand from china so that is a good sign. In terms of exports, one of the keys is china recovery because that has been a big part of the drag on japans exports performance over the past year and a half. Paul all right, izumi de valier, thank you for joining us to unpack the latest trade numbers out of japan. Those of you away from a screen, you can always find indepth analysis and big newsmakers on Bloomberg Radio, now broadcasting live from our studio in hong kong. You can listen on Bloomberg Radio plus or bloombergradio. Com. This is bloomberg. This is daybreak asia. Tokyo andets open in seoul at the top of the hour. Lets get to sophie for what to watch. A toughthe nikkei up to start. Rose to close in a fresh alltime high overnight. Stocks to watch and seoul, korean shipbuilders in the eu, extending between day will and shipbuilders. Ono watching fujifilm reports that they could buy another company. Keeping an eye on hitachi. Losses related to coalfired power plants in south africa. Jp access to extend its limit if the stock does not trade wednesday. Shery in the next hour, more on the outlook for markets with evans and Partners Investment advisor, and Shareholder Activism in japan. The market open is next. This is bloomberg. Paul good morning, i am paul allen in sydney. Asias major markets of just open for trade purity trade. Shery in new york, i am shery ahn. Sophie welcome to daybreak asia. Paul our top stories this wednesday, a few details emerged of how china will buy more u. S. Goods if tariffs are lifted, and some incoming shipments may be moved from hong kong to mainland ports. Sterling slumps on Boris Johnsons plan to enshrine next years brexit deadline into law, but the u. K. Wins a higher Credit Rating. Shery hong kong suffers more fallout from you from months of unrest. Job cuts and even bankruptcy. First, japan and south korea coming online, lets get to the market action. Offie the nikkei 225 attentively percent as we adjust digest the letters trade figures from japan, exports falling for the 12 straight month, the longest losing streak since 2016. Seven. 9 nearly drop in november was less than the 8 decline anticipated economists. This morning, the and holding steady. Expected upside risks if cable falls below. This is the worst drop for the pound against the greenback since january on concerns of a no brexit deal. Korea, the cost be adding less than 1 10 of 1 adding less than 1 10 of 1 . P of iphonedro sales in china last month. Nab dropping the most on the asx by after the bank was it suit from a securities regulator. Yuanmorning, the offshore consolidated with a 200 Day Moving Average. Paul thank you. Lets check in on the first word news with jessica summers. While sterling slums the most since january, thats as fx traders gave the thumbs down to Boris Johnsons plan to enshrine next decembers brexit deadline into law. The renewed prospect of a hard exit from the eu erased all of the gains since last weeks conservative election when viewed win. Good of england could cut in may viewed anger continues across india as a government defends a controversial law that prevents undocumented muscles from citizenship while allowing migrants from other religions to do so. The Prime Minister helped move the bill through parliament until and told his misleaders theres no chance it will be repealed. There were clashes in new delhi and protests flared in mumbai southeastern state. A military leader and pakistan faces the Death Penalty after a sentence. This is seen a blow to the powerful armed forces. Since 2016d in dubai and never attended court. This is the first time in pakistans 72 year history that a military ruler has been tried for treason. China is boosting its military might with the commissioning of a second aircraft carrier. It came into service in the presence of president xi jinping. It is entirely home built and designed. Another was commissioned in 2012 after being remodeled after a soviet ship. Day onnews 24 hours a air and on quick take by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries, i am jessica summers and this is bloomberg. Paul thank you. As the u. S. And china are to have reached a trade were trues, will a a truce, will a phase one deal affect 2020 . Our guest joins us. Thank you for joining us. We are getting more details on the trade deal, but as you unpack it, how different is it really . We have tariffs removed on ethanol, maybe rerouting shipments from hong kong to china instead. Are things better than they were two years ago or is the best we can say that they are not getting worse . Lucy we think phase one of the u. S. China trade war is significant, and some of the details were a little wishywashy. Expectations for china to buy an additional 50 billion of agricultural products, more than , or lofty atpeak best. But what we need to remember is that this indicates that donald trump is likely to be open to deescalating the trade war. That is the important thing to come out of this regardless of the details. Really, the trade war has been a handbrake on Global Economic growth. With the clear line of sight, it is a positive. Paul we have seen markets react positively. If you would invest, where would you get better news . Lucy almost certainly china. U. S. Had a marginal uptick on the back of this, but how much further can ago, that is the interesting can it go, that is the interesting point. China has more upside to go. That is where we would be looking to invest. Again, focusing on longterm Growth Trends in china will see them through this period. They have a lot of domestic consumption forces, the growing middleclass, so we would be looking to focus on companies exposed to the new economy, services, health care and ecommerce. On the bluebird showing the shanghai composite has been underperforming the s p 500 the past five years as we see trade tensions. Its not just that we have better trade news, but we are seeing surprisingly good data out of china, so would you play the cyclical rebound story . Lucy thats right. On monday we saw positive data out of china retail sales and Industrial Production both good. That points to the cyclical rebound story, ill be at slowly, with increased any factoring reentering into china. There is also a sentiment element to it, where we have seemingly reduced a key source of geopolitical risk in china, and we should see that play threw two markets as investors are more confident the put money there. Shery what will that do to the pboc policy, given that we have seen only very targeted measures to support the economy . We have better news on the trade data and stronger economic. Could we see the pboc pulling back and what would that do to the market . Concernats a very fair. We know previously, the poc, when they have considered stimulus in china, it has more been the case of bad news is good news, where they come in and help prop up the economy. We would be looking to see the pbocs ongoing commitment. We saw it earlier in the week, and they made comments that they would provide stimulus in support of china reaching the growth target of 6 . We saw some Monetary Policy stimulus earlier in the week and they added an additional liquidity injection. We are seeing the pboc are making moves to continue to support that, but to your point, it will be interesting to see how much they are willing to go if the Economic Data continues to improve. Paul what is good for china is typically good for australia as well. Looking at this chart on the bloomberg, we can see we are within touching distance of a record, i believe it got there briefly on tuesday. Many stocks are still under bought even though we are close to a record. Where do you look . Do you still need to be very selective . Lucy its hard to find areas where stocks are overbought. Returned 26 this year, is hard to find value, that but for investors exposed to the asx, important are the offshore earners, particulate international industrials. Theres been a pullback the last few months, names like ramble and the like. We are looking to place money there. As we know, some of the Economic Data points in australia are pretty disappointing. We saw a comment from the government with the Economic Outlook on monday, just to reiterate that things are not looking that great in australia. We certainly want to leverage our exposure to where we can get earnings offshore. Paul theres a very heavy domestic angle to the picture here. What are your expectations for the coming quarter of earnings . Lucy there is nothing to suggest it will surpass expectations, which are muted. We know if we look more generally at the australian economy Going Forward in 2020, we are not looking like we are going to receive added stimulus injections from the rba we have come to expect, they provided a nice sugar hit to the market, where we had an Interest Rate cut and equity markets have rallied on the back of that. We dont expect to have that sort of support on the domestic market. Again, certainly looking for offshore opportunities to really find returns. Shery another market where we are seeing record highs is india. This chart on the bloomberg showing the 200 Day Moving Average at a record high. Could india be a convincing longterm play . Lucy we certainly think so. It is within the context of really how difficult it is defined value in more mature and advanced economies, particularly the u. S. And australia, that we need to look at markets like india, where the potential for growth is pretty convincing. Thea is currently fastestgrowing major economy in the world. 6 are looking at gdp above this year, and if we focus back on longterm growth drivers, they have a massive focus on mumbairucture, the Industrial Corridor is the largest denver structure project in the world. Largest Infrastructure Project in the world. That is a driver for employment. We have a very Large Population expected to exceed chinas population by 2030. And the makeup of the population, over 60 is 35 and under. It is a source of the growing middle class, and we expect that to support companies that are domestic facing, consumer groups, services and the like. We see a long runway for growth and were happy to invest in india. Lucy, stay with us. We have more to discuss. Next, Boris Johnsons perceived no deal threat weighing on markets and erasing gains since the election. We will see if lucy sees value in u. K. Assets. This is bloomberg. Hard brexit. Hard brexit on the table. No longer beholden to the hardline brexiteers. It allows him to go either way. Questions about what were johnsons approach will be. The Prime Minister remains ambiguous. The news this morning injects uncertainty. It will not be plain sailing. A very bumpy road. A continued ounce in sentiment. More excited about u. K. Equities. I have a hard time seeing consistent buying of u. K. Assets. Some guest comments as fears of a hard brexit return, but other but are the fears justified and what does Boris Johnsons election victory mean for u. K. Markets . Lets get back to our guest. You have force johnson appearing to port put a hard brexit back on the table, but he has the largest majority since margaret thatcher. Should we look through the noise and consider this a negotiating tactic . Lucy that is one angle of this. I think there are couple of at on theneed to look brexit issue and how it has progressed since the outcome of the u. K. General election over the weekend. That it has benefit given us more clarity on the governments positioning on brexit, and as you mentioned, Boris Jackson johnsons tactic, if they can no longer decemberst the 2020 deadline. I think potentially the most important thing when looking at the u. K. Assets in investments that i think a lot of people are not focusing on are the promises Boris Johnson made going into the election, which was more fiscal stimulus. To support u. K. Businesses. I think its likely we will see a boris boom that we have been hearing about in that is an attractive incentive when we look at how undervalued the u. K. Assets are at the moment. Shery we seen the u. K. With a higher Credit Rating from the s p and fitch. Isonder how justified that when we continue to see u. K. Economic data underperforming. This chart on the bloomberg showing the economic index is in the negative, underperforming data from the u. S. And europe. , that is the Credit Rating stance for the moment. If we look at Forward Investment potential, the stimulus we will likely see from Boris Johnson may only improve the credit quality of businesses and the government. As you said, he has a majority, so its more likely he will have some uncertainty for the government position Going Forward. But there is no way this year and the way the brexit issue transpired be without volatility. We certainly think that is one issue, the only issue we can be certain of the brexit saga. We are likely to see it carry out in the currency as we did overnight, the pound down almost 1 , and also through equity markets. Certainly not for the lighthearted investor, but there is value to be found. Shery lucy, thank you. Evans and Partners Investment advisor. Next, boeings troubles may not be airbus is again. The european lane maker continues to face production snacks with its popular jet. Snags with its popular jet. Shery breaking news out of japan, we are seeing falling as thatas 11 on a decision there will be a discontinuing of a treatment for car chronic stroke. Under pressureem all week, they slid the most in 10 months after the news earlier in the week and they are now falling as much as 11 . You can see the oneweek pressure, the shares down more than 40 . Paul as boeing halts production hasts 737 max, airbus another problem. It needs to lift deliveries by 75 this month to meet fullyear production targets, that is amid an order frenzy of another model. Lets bring in angus. Is this even possible . Angus thats a good question. Im not sure we know the answer yet. It certainly is the story of rival manufacturers, they cannot be more stark. Boeing with a backlog of close and000 orders for its max cant make them and hasnt been able cannot deliver them, rather, and it is halting production. And then you have airbus that you would expect would put the hammer down and it cant make a30 family of jets. The backlog is extraordinary for airbus. A320 backlog,t the it has effectively sold out until 2024. It is a big task. You would expect airbus would want to consolidate its advantage over boeing, which is going through a crisis. Its also critical for airbus because, as you said, demand for the stretcher version of the series, the longerrange version , thats its highest margin plain in the family and they cant maximize that production. Its missing out on profits. Paul to what extent are we seeing distortions emerging in the market . We have an under supply of plans right now, but one imagines that when boeing officially eventually gets clearance for the max, those planes will come back into the market. Angus certainly there is a change in the preferences of airlines, true around the world. Part of the reason airbus is going through problems is there has been higher demand for the stretcher version. Its a very versatile aircraft, it is a workhorse, but airlines like it because they can cram in economy seats right through the cabin, and it can fly longrange fly larger,used to gaskell jewelers gas guzzlers. It is a popular aircraft for that. Thats why it accounts for more than 40 of the backlog of the family. You are right, once the max is up and ready again, it will be a those midrange, smaller aircraft. Shery just quickly, how much is it also to do with airbuss cabin layout . They give more flexibility to airlines. Could we see a simile the shortage see Assembly Lines mitigating the shortage . Angus this is part of the reason they havent been able to build it as fast as they wanted because they offer what is called cap and flex, that airlinesx that allows to put into hundred 40 economy seats, whereas there might be fewer than 100 and multiclass layouts. Its not great for airlines but it makes it more difficult to manufacture to offer those. As you say, one solution may be to use the production lines, when that comes off the production schedule, is likely we will see the family injected into that schedule. Shery thank you. Lets turn to hong kong. The antigovernment demonstrations are causing turbulence for the cities airlines. Our asia transport reporter joins us from singapore. How bad is the situation for hong kongs airlines . The stories are quite bad for mainlyg Kong Airlines because inbound traffic has fallen off since the protests. Last month, cap they said inbound traffic fell 46 , cathay said inbound traffic fell 46 . Less travelers are coming to hong kong because of the protests. The other factor hurting airlines is the fact that traffic between hong kong and china has fallen off significantly compared to other routes. Hong kong and china makes up the s annual revenue. Its really hurting hong kong carriers amid protests. Paul what steps are going to be taken by airlines to cope with these challenges . Right now, the most significant steps they have taken is taking out capacity, trying to minimize their losses by flying planes pretty much empty, which happened earlier when the protests initially happened. They are taking out capacity, which has helped to them a bit, but they might have to take drastic measures next year if this continues to drag on. Drag on is what everybody is expecting and less protests abate. They might have to think about more drastic measures like job cuts, or we might see one airline going under more financial troubles next year. There will be more challenges Going Forward than what we have seen so far. Right, our transport reporter in singapore. Thank you. Still to come, we will be speaking to one of australias largest Institutional Investment managers. She joins us in a moment. This is bloomberg. I am jessica summers with the first word headlines. The house of representatives have passed spending bills to fund the federal government through next september, and avert a shutdown when current funding expires friday. The bills come after weeks of partisan talks and head to the senate, where they are expected to pass. The white house and President Trump will then sign them into law. The u. S. Government is handing out calls by china and russia to ease sanctions on north korea despite claims that pyongyang has complied with yuan resolutions. Met pushback from washington with President Trump saying he would take care of any threats. Beijing and moscow say north korea is at a critical situation and needs help. A democratic led House Committee has moved the usmca trade deal forward, sending the measure to a full house vote on wednesday. Overhauling nafta will give President Trump muchneeded Political Capital as he faces an impeachment hearing later wednesday. The republican led senate will not take up the trade accord until the new year, after the conclusion of the impeachment trial. And there are more signs of hong kongs economy suffering under the impact of prolonged protests. Month toent past 3 us the highest level since 2017, with an eight year high of more than 6 in the food and beverage sector. Meanwhile, local Airlines Faced job cuts and even bankruptcy. Cathay pacific reported a fourth straight monthly drop in passenger traffic. Is the firstator military leader of pakistan to face the Death Penalty after a sixyear treason case. The verdict is seen as a blow to the powerful armed forces, and drew strong criticism from senior officers. Since 2016d in dubai and never attended court. It is the first time in pakistans seven to the 72 year history that a military leader has been tried for treason. Global news 24 hours a day on air and on quick take by bloomberg, powered by more than 2700 journalists in more than 120 countries. This is bloomberg. Shery time for another check of the markets. A mixed picture across asia. Sophie that is the case with asian stocks little change with the nikkei two to five off about 2 10 of 1 , especially considering the latest trade data from japan whistle exports fall for a straight month. From u. S. To comments treasury secretary Steve Mnuchin in an interview in which he spoke of trump wanting a level Playing Field with china and saying the important mechanism is a very strong business space. Hanging in atuan the 700 handle. The Dollar Holding Steady amid 109 levels. I want to show you this chart on the terminal demonstrating what we are seeing when it comes to technicals around the dollaryen , a golden cross formation, a 50 die dateline moving above the moving average for the First Time Since mid2018, signaling there could be more weakness for the japanese yen, the only g10 fx to slip against the greenback in the last month. Check in on some stocks that are on the move. Tokyo,to highlight in low sliding to a twoyear after a Pharmacy Company decided to stop development of a treatment for chronic stroke. On the other hand, another rising 10 as ceos said they no longer plan to end their capital tie up with hitachi viewed hitachi. They could settle with mitsubishi over a power plant in south africa. Both are expected to accept the proposal. Paul thank you. The dallas fed president is taking comfort from the recent steepening in the yield curve and he sees it a sign the policymakers are on the right track. Lets take a listen. Symptom, the curve is a that maybe our adjustments were about right. It was not intended to solve these issues, but it was intended to adjust policy in light of these issues. I think the curve being upwardly sloping tells me we are probably in about the right place. Paul Robert Kaplan speaking exclusively to kathleen hays. Lets get over to brisbane and discuss that with susan buckley. They areplan saying pretty much in the right place. He went on to say that there would need to be a Material Change in the outlook of gdp, inflation, the path to employment. What are the odds of a meaningful change in any of those things . Susan thank you. It is no surprise that the fed is on hold, wait and see mode at this point. The slight steepening of the yield curve is heartening to some extent, but we are only just off the zero levels. It is early days in our view, of we are looking at outlook slow growth in 2020. We still think the fed will be cutting rates in 2020. Paul that is something of a contrarian view, most people expect the fed to remain on the sidelines in 2020. What do you think will happen . Perhaps the damage is somewhat done because of the trade war we had this year, although the latest phase i agreement is great news, we are not getting further escalation. U. S. Manufacturing is in recession and the indicators for employment are mixed. We are a little bit cautious going into 2020, not getting too carried away with optimism that equity markets are displaying right now. We will look at the data like everyone in early 2020, where obviously the u. S. Consumer is really important. Trendrowth still below and inflation fairly muted, we think the case will be strong for the fed to be cutting one or two more times in 2020. Shery someone else came out and said that inflation may be underpriced. This chart on the bloomberg showing you the coppergold ratio jumping to the highest since july, and every time we have seen that, we have cindy 10 year yield climbing. He is saying that could climb to 2. 15 . Yields goingput forward into 2020 if you dont see these risks . Low Interest Rates are really bumping up asset prices, equity markets, Commodity Markets having a good run. I guess in our view, inflation is viewed through other factors as well. There are some structural and technical downward forces. Even if we get some roll block on tariffs, which will be good news economically, it would put downward pressure on inflation in 2020. We think if we get a correction in the bond market, it will be good levels for us to be adding Interest Rate risk in duration for portfolios. We see a range in the u. S. Tenyear of 150to 20 on the u. S. Tenyear through much of 2020 viewed shery 2020. Shery we see more Economic Data supporting u. S. Growth. You dont see any risk of overheating, especially if we do get the trade deal, not to mention, not only between china and the u. S. But mexico, canada and the u. S. . All goodese are indicators at the margin, it is good news, but we still think there will be a need for more policy stimulus to keep this activity going. Still showingis it is in recession. The indicators of unemployment are heading lower. Some mixed data year, we have the news this morning on the boeing production cuts, that will add volatility to gdp early next year. A little more stimulus is going to be required to keep growth healthy and getting toward trend levels. Australia, we had the Midyear Economic update from a government, and what are the key and one of the Key Takeaways from the rba was you are on your own. What is that mean for the future of Monetary Policy in australia in 2020 . How soon will we get the quarter of 1 threshold and qe after that . Susan the minutes yesterday showed that the february meeting is a live meeting around further rate cuts. Are figuring in one more rate cut as a base case. We dont see the aussie consumer responding to the rate cuts, we will get more, down to the effective lower bound of a quarter of 1 . Beyond that, we have a look at unconventional Monetary Policy tools if the economy cant strengthen into next year. Asset managers getting ready for the potential of qe in australia . Can come in a number of forms. They can use forward guidance. Ratesng expectations that are not going up for a long time. They can buy bonds. Government bonds and semi government bonds are potentially the target initially for qe. Certainly with just the conventional lowing lowering of Interest Rates, the fall of the currency is a potential. We will be looking for strategies around that. We want physical government bonds and portfolios, were looking for Downside Risk to the currency in 2020. With the lower rates, we think credit markets will perform quite well as well. Shery susan buckley, thank you. Coming up next, we will discuss the rise of Shareholder Activism in japan and its impact on markets. This is bloomberg. Shery this is daybreak asia, i am shery ahn in new york. Paul i am paul allen in sydney. Shareholder activism in japan is combining with rare hostile takeover bids, the trend seen as good news for investors. Sophie, what are you seeing . Hasie Prime Minister abe been calling for executives to better run their companys for years, with a stewardship code in 2018, and more the following year. Inare seeing record activism 2019 was shareholders making proposals at annual meetings at 54 companies in june, up from 14 the previous year. Another surprising developing, the increase in unsolicited takeover bids for Japanese Companies themselves. Of aatest, taking control toshiba affiliate. A minimum two thirds stake million,more than 2. 3 in a bid to buy a public shares. Shery lets get straight to our guests from hong kong. Travis, great to have you. How would you assess activism in japan . Especially after the stewardship code was implemented in 2014 . Travis theres been an increase in activities where investors have been able to effectively take a stick to Japanese Companies. There has been the stewardship code, it allows investors to use the governance code in particular to identify weaknesses in Japanese Corporate governance and take them to task. Shery does that help in the companys performance . Travis i think it is early to say. Japanese companies have had a tailwind of Corporate Governance improvements including buybacks, increases in number of independent directors, but there are 3600 listed companies in japan and it is a slowmoving beast. Paul have theyre also been cultural barriers not only to hostile takeovers but Shareholder Activism in japan . Travis there certainly has been. Years,goes back 70 or 80 prewar, japan was something of a wild west in terms of activism. Postwar, it toned down considerably. The changes in the m a rules over the years have enabled a little more activity, but in the past 12 months or so, weve seen a significant increase in activism by corporates on other corporates. Paul are there any particular examples that stand out . Year, iin terms of this think the most interesting a company thate had a stake in a company that makes ski Wear Clothing and accessories. With them, andd they refused to engage on the terms and they launched a tender offer earlier this year there was thought strongly. Fought strongly. In the end, they increase their stake to about 40 . Changed. Ement weve also seen yahoo japan take an activist role in its own ownership of a company. It was in the news this morning as having decided to not ask yahoo japan to sell its stake after yahoo japan pushed out the ceo and defective founder of the company. De facto founder of the company. Shery why are we seeing this change in japan . Is it all to do with the governments move . Travis i think it is perhaps more to do with the maturity of the japanese market. You seernance pressures from society and shareholders. Japanese companies are under pressure to raise r. O. E. And orre are two ways, raise r reduce e. Buybacks or special dividends, or going out and getting about your business. That includes in situations like joya, where they are looking to purchase new flare, that includes increasing the scale of their business and their existing customer base. Shery one of the flash has been of takeover attempts companies by affiliates and subsidiaries, socalled parentchild listings. This is not only in japan, we have similar issues in south korea. Could we say that at least in japan, these structures could start to fade given we are seeing more activism there . Travis certainly. The government and other Political Parties have made a strong effort to try to convince shouldes that they either take over subsidiaries or sell subsidiaries, or reduce the control they have because dual listing is unattractive aspect of the japanese market. I think some of the tax changes and some of the rules that have been put into the Corporate Governance code and the amendment of the code this past june encouraged companies to take a much stronger look at how they deal with subsidiaries, how they deal with minorities of subsidiaries, and ethics across holdings. Analyst, right, our thank you for joining us. Still to come, taiwanese stocks see the highest level since 1990, and further games could be in the cards. We will discuss the prospects heart ahead of the open in taipei. This is bloomberg. Paul you are watching daybreak asia. Thwest asia expects airlines expects to go more than max without its boeing 737 fleet. Ofrepresents almost 8 southwest daily operations. Clinched one has point two 5 billion from goldman sachs. This is the First Hurdle Cleared by softbank in an attempt to put together 5 billion of a bailout package. Sources tell us the funds will free out free up a hundred Million Dollars in cash. Paul fujifilm might be moving further away from photography toward the lucrative health care sector. It is in talks to buy hitachis imaging units, which is worth 1. 6 billion. Health care and diagnostics is the highest revenue generator in fujifilms business sectors. Shery taiwans mission to retake the Global Supply chain amid the trade war oaks like to be paying off for investors. Stocks closed over the 12,000 mark for the First Time Since 1990, and even more gains could be ahead. Our editor joins us now. A lot of those gains are based on the optimism that perhaps we could see a bottom for chip prices, which we still havent seen. How sustainable are these gains . Chris the broad consensus among strategists is they can be sustained, and things are looking pretty good for taiwanese stocks into next year. Even as the Global Industrial sector kind of limps along, taiwan has really done a great deeper intog itself the Global Supply chain and pulling manufacturing from competitors. Its exports are growing. This morning, we got numbers out of japan showing exports continuing to contract. Taiwanese exports are up. The next wave of the electronics cycle with 5g seems to be benefiting taiwan in particular. There are forecasts from banks including j. P. Morgan that suggest record highs, alltime record highs in taiwan next year for the first time in a generation, essentially. Risk is always something to consider when looking at taiwan. Does that provide buying opportunities in a way as well . Chris that is certainly the view of some research. A note was put out weeks ago that if there is some saber theling from china, should president win reelection, she has advocated a standoff approach toward the mainland, go in and buy. These guys are among those that are picking up on signs that manufacturing in taiwan is set to boom for the longer haul. Malicious looking at some that showt of the imf that taiwans population is still rising, its employment numbers are rising, and it is wellpositioned for years to come. Right, thank you. Lets get a preview of what to watch and markets later this morning. Ifhie washing to see chinas major benchmarks can keep running hot. Trait ofeen with elements and signs of economic recovery, some indexes rose more than 1 , pushing rsi above 70 and turnover hit a three month high. The market is the most overheated since early september. Stocks to watch, were looking at hong Kong Airlines and the prospect of further job cuts. Cathay pacific reported a fourth straight monthly drop in passenger traffic. Afterand ecommerce unit executives were arrested on suspicions of bribery. Also, a report that daimler is strengthened to is trying to strengthen control of its chinese unit. Shery stand by for Bloomberg Markets china open. This is bloomberg. What are you doing back there, junior . Since were obviously lost, im rescheduling my Xfinity Customer Service appointment. Ah, relax. I got this. Which gps are you using anyway . A Little Something called instinct. Been using it for years. Yeah, thats what im afraid of. He knows exactly where were going. My whole body is a compass. Oh boy. The my account app makes todays Xfinity Customer Service simple, easy, awesome. Not my thing. A. M. , welcome to Bloomberg Markets china open. We are counting down to the open that trade on hong kong and mainland markets. Tradee details emerge on and how china will buy more u. S. Goods. Ethanol tariffs will be lifted and some shipments pay me moved to ports. Rates should stay on hold barring a change in outlook. Hong kong suffers fallout from unrest, unemployment is